Rural Energization and Energy Markets

1. Rural Energization and Energy Markets Presentation Minister Phumzile Mlambo-Ngcuka Minister of Minerals and Energy Republic of South Africa

2. INTRODUCTION • It is estimated that 2 billion people world wide, majority of whom live in developing countries, do not have access to modern forms of energy • The challenge for the world is to ensure increased access to affordable, clean, sustainable and reliable energy sources for the world’s poor • Excellencies Chairperson, Ladies and Gentlemen allow me to present to you the African Context..

3. Whilst Africa represents 13% of the worlds population, it only consumes 3% of worlds total energy. • Africa is a major net energy exporter including non-commercial fuels like wood, biomass and charcoal. • Africa is a heavy user of traditional fuels, primarily biomass. In 1994 according to the World Bank, around 65% of Africa’s total energy consumption were made of biomass, which is collected by women and girls, which is largely unpaid labour. • Less than 8% of the continent’s 722million people have access to commercial energy, 452 million are located in rural areas and approximately 300 million thereof are poverty stricken earning less than US$ 1 per day..

4. Evidence clearly indicated that access to the services which modern energy provides is a prerequisite for sustainable social development and economic growth, which is necessary if Africa is to successfully address human development and the divide between the continent and the developed world. • In the continent starved of access to efficient and reliable sources of energy the benefits of energy supply are convincing.

5. Some North African Countries and South Africa have progressed significantly in case of Rural Electrification e.g. South Africa has achieved 70% electrification. • However, SA has not aligned its electrification strategy effectively with poverty alleviation, job creation and urban planning programs. • An urgent exist to introduce appropriate, efficient and energy saving production and processing technologies. • Both issues of accessibility and energy consumption patterns are important for the sustainable development of South Africa and the whole African continent

6. Managed Liberalization and Challenges Facing SA • The whole energy sector in South Africa is under review in order to achieve the following objectives: • Improved social equity through Universal Access, • affordability of energy sources • Improving energy governance • reliability and security of supply • minimizing impact of energy use on the environment

7. The South Africa Energy Sector • Liquid Fuels • South Africa is a net importer of petroleum products • Access, affordability, jobs, better utilization of technology and security of supply is one of key consideration in the developments that governs the liquid fuels sector • Greater but not complete liberalization is envisaged to bring greater benefits to the country’s liquid fuels markets.

8. Renewable Energy • More green energy in the South African energy mix, is envisaged • Initiatives are in place to increase access, consumption and affordability of Renewable energy sources in the medium to long-term • greater control of technology is needed to achieve these objectives • hybrid solutions that are relevant to South Africa are currently being developed. • Integration of grid and non-grid technologies is currently being implemented

9. Nuclear • One of the country’s key energy policy objectives is the security of supply and diversification of primary energy sources • currently the Pebble Bed Modular Reactor (PBMR) is at its feasibility study stage • the Challenges facing the country are on waste storage and human resources development in this sector. • PBMR’s ability to increase access to energy would further assist the country in its quest to increase affordable energy sources for millions of our urban and rural poor.

10. Electricity • The government’s vision and mandate is to optimize the operation of the Electricity Supply Industry so as to maximize its potential to provide adequate, reliable and low cost electricity to the people and industries. • In line with this vision restructuring is currently in progress in the generation, transmission and distribution sectors. • Our electricity generation is largely dependent on coal, which has serious environmental implication for the country.

11. Electricity continued….. • We believe that significant economic benefits will be realized if our Electricity Supply Industry restructuring is carefully designed. • To this effect the government has embarked on managed liberalization of the generation sector which will see the introduction of private sector participation in the medium to long-term • the policy permits free non-discriminatory access to the transmission network, which is a natural monopoly and • the consolidation of the distribution sector, which will see the number of distributors being reduced from 250 to 6 Regional Electricity Distributors (REDs)

12. Electricity continued... • In line with New African Initiative’s vision an African Power Pool(Pan African Grid) will ensure access to both public and private utilities, further increasing regional and continental electricity cooperation in generation and transmission.

13. Critical Success factors • Access to affordable energy for poverty alleviation • reliable and security of supply to sustain accelerated economic growth that will result in the following • growth in GDP • creation of significant multiplier effect in the economy • forward linkages resulting in stimulation of projects e.g. appliance manufacture • attracting FDI and maintaining competitive positions in global markets • creation of synergies with other infrastructure services

14. Environment • The challenges of environment can be addressed by • reliving pressure on local fragile African environment caused by biomass collection • reduction of the enormous amount of energy wasted e.g. gas flaring • the use of existing world class resources e.g. development of the African Hydro-energy potential(Nile, Inga, Cahora Bassa)

15. Institutional Arrangements and funding • Energy supply to the residential sector will require US$ 70 billion over the next twenty years and US$ 350 billion to reach 100% electrification levels of the residential sector • It is further estimated that to sustain GDP growth of 7 % per annum for the next 10 years and 5% per annum there after development costs of ESI over the next 20 years amounts to US$ 610 Billion all economic sectors • In order to achieve these robust institutional and administrative arrangements should be in place

16. Institutional Arrangements and Funding.. • African governments and their energy utilities, thus need to satisfy these critical success factors for private sector participation in infrastructure • Planning- Defining Africa’s Future • key issues to ensure successful execution of projects are: • Data accuracy • technical competence • correct costs estimates • schedules • energy modeling

17. Implementation • In order to successfully implement the major projects that area required to meet the projected demand and the poverty alleviation programs in Africa concerns of domestic support organizations, groups, investors and other international organization are recognized. The implementation issues are identified as: • Contracting-identification of suitable contractors and their success • Management-projects should be managed by Africans to ensure sustained success in implementation • Construction-obstacles encountered should be addressed and mitigation factors addressed

18. Critical Actions THEVISION OF THE NEW AFRICA INITIATIVE ARE: • By year 2020 35% of the continent will have access to reliable energy • Energy supply will enable an economic growth of 6% over 20 years • To achieve these targets the Continental Energy sector priorities are; • Rehabilitation of Infrastructure • Reinforce national grids • Develop regional power pools • establish coordination forums • exploit “waste to energy” opportunities (flared gas, discard coal)

19. Other identified green fields projects • Regional Transmission interconnections • Zambia-Tanzania-Kenya interconnector • Pan Africa grid (7 projects) • Power generation Hydro-projects • River basin hydrological studies • DRC Inga 3 development • Mozambique development of Mepanda Uncua • Zambia development of lower Kafue • Gas projects • West African pipeline • Supply of LNG

20. Other identified green fields projects… • Liquid Fuels • Refinery Increase Capacity of Natref (South Africa) • Development of Lobido, Angola • Rural Energisation Projects • Rural Energization of South Africa(US$100 million per annum) • SADC project for biomass conservation • Alternatives to fuel wood -Gelfuel • All of these area some of the projects scoped and being investigated and are part of the New Africa Initiative business plan. • Most of these projects offer a life time opportunity to ensure rural development as a core plan of NAI

21. As Africa gears itself for comprehensive energy interventions energy efficiency need to be given priority

22. CONCLUSION • There is no size feeds all solution for Africa • Approaches to the African Energy markets need to be responsive to the issues at hand to provide sustainable interventions and multiple benefits • Africa’s growth is dependent on what is done to energize the rural poor in an affordable manner whilst creating economic opportunities.